Impacts of Covid-19 Pandemic on Vietnamese Firms
The business community plays an important role in Vietnam's economic development and is also an important actor to deal with global problems, including the Covid-19 pandemic. Recently, the Vietnam Chamber of Commerce and Industry (VCCI), in collaboration with the World Bank in Vietnam (WB) and with the resource support of the Australian Government, and the participation of 10,197 businesses across the country, conducted a survey on specific perspectives of Covid-19’s effects and ways that businesses chose to respond.
The survey showed that 2020 was a tough year when nearly 90% of businesses were severely affected by the pandemic, with many consequences such as reduced accessibility to customers, imbalanced cash flow, and disrupted supply chains. Many businesses laid off their employees, halted operations or even went bankrupt. The hardest hit were mostly micro and small businesses which were set up for less than three years.
The year witnessed a record number of corporate bankruptcies, surpassing 100,000, but also marked the resilience of the business community to overcome difficult circumstances. Resilience is becoming core competitiveness of the Vietnamese economy and business community. Enterprises have also awakened and realized many things through the pandemic. They have to rethink their strategies, restructure, retrain their labor force, pay more attention to the domestic market, build supporting industries and supporting chains, and diversify consumer markets and supply chains. Initiatives in response to Covid-19 have been implemented by businesses. Digital transformation has also been carried out step by step. These invaluable lessons and experiences have come from Covid-19.
Facing these results, in addition to active initiatives of the business community, the backing and support from the government with support policies and companionship in the context of Covid-19 are most appreciated by enterprises. Its actions include fiscal policy aimed to extend the deadline for tax payment and land rent among others and loosen credit policy followed by banks. Zero-interest loan to companies for salary payment was hard to access in practice but the business community still highly appreciated its actions. 75% of businesses thought that the government’s supporting policies are helpful.
From governmental support policies and practices, in recent years, the business community also proposed, in addition to immediate solutions introduced by the Government, central and local authorities, steps such as tax exemption and reduction, tax extension, tax payment extension, interest rate reduction, and cost reduction, need to pay attention to longer-term solutions. For example, the Government needs to increase public investment, complete infrastructure, and launch necessary stimulus packages in the course of economic recovery.
Enterprises also believe that long-term macro-economic policies essentially involve developing the domestic market and fostering connectivity between domestic enterprises and consumers to form Vietnamese supply chains. More importantly, most suggested improving the legal system and removing bottlenecks in administrative procedures for a better business environment.
Without a doubt, if tax and fee solutions and credit and fiscal access are limited due to budget limitations, more easily implemented administrative procedure reform solutions, which have been stepped up in recent years, desperately need to be accelerated. Enterprises emphasized the importance of reforming administrative procedures, enhancing law enforcement to create a favorable business environment, facilitating sustainable business recovery in response to the global contagion of Covid-19 pandemic. And that is the most basic foundation for business recovery and development.
In fact, enforcement is always the weakest stage. Improving enforcement capacity should therefore be a priority. To do so, central and local authorities need to strengthen information and communication on support policies to help enterprises access support packages.
As for enacted policies, authorities need to know how they are implemented, especially shortcomings in the course of enactment to adjust or recommend timely adjustments and appropriate support for businesses in each industry and field and in each period, with a focus on businesses active in industries severely damaged by the Covid-19 pandemic. It is necessary to pay more attention to small and micro enterprises because of their limited resilience.
In addition, it is important to make policies to develop supporting industries and services to reduce dependence on external sources, and decrease long-lasting offshore outsourcing, while creating more added value to lift the position of global supply chains, generating more opportunities to benefit from FTAs that require high levels of domestic/intra-block origin. The Covid-19 pandemic is giving Vietnam an opportunity to do that as major partner countries such as Japan, the United States, the European Union (EU) and Australia are looking for a place to move part of their supply chains out of their major production bases. With a number of new-generation FTAs such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU - Vietnam Free Trade Agreement (EVFTA), Vietnam has more opportunities to be chosen, if the Government has clear policies and objectives to encourage and facilitate Vietnamese businesses and attract investment fund from the above partners to prioritized industries and fields.
At the same time, the Government should have policies to create more favorable policies for Vietnamese private enterprises to survive and develop after the Covid-19 pandemic, especially in innovation and personnel training for new competition.
On the other hand, relevant ministries and branches need to study and propose to the Government and the Prime Minister to issue policy support packages for businesses to recover and expand business investment for the new period of 2021-2025.
Finally, it is necessary to spread and scale up good models and practices in response to the Covid-19 pandemic. For their parts, central and local authorities need to effectively carry out business support policies. Business associations need to share how to effectively respond to Covid-19 from businesses that have already existed and developed in the difficult context of the Covid-19 pandemic, especially lessons learned about selecting markets, partners, business relations and investment for core business to enhance resilience to shocks.
Through a very tough time to live through, enterprises and entrepreneurs are real heroes in the country's economic development. VCCI is always ready to reflect their voice and protect their interests and will continue to recommend policy initiatives to support business sustainability and recovery in the pandemic era.
By: Dr. Vu Tien Loc, VCCI Chairman & President, Vietnam Business Forum/Vietnam Business Forum
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